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Businesses call on Government to reconsider National Living Wage targets

09 Aug 2016

Business groups, including the Federation of Small Businesses (FSB), have written to the new Business Secretary, Greg Clark, calling for National Living Wage (NLW) targets to be reconsidered in light of the economic uncertainty generated by the UK’s vote to leave the EU.

Introduced in April, the NLW requires employers to pay employees aged 25 and over at least £7.20 an hour.

The NLW is aimed at ensuring that over 25s earn a minimum of 60% of median earnings by 2020. The Government predicts that the NLW rate could potentially rise to over £9 an hour by this time.

However, the 16 trade associations, including the British Hospitality Association and the National Farmers Union, have called on the Government to moderate increases.

Their letter revealed that member companies are having to revise growth, investment and employment plans ahead of the predicted NLW increases.

The business groups also stated: ‘We recommend the Government restores the Low Pay Commission’s powers to objectively assess the impact of the wage increases on businesses, and recommend future living wage and minimum wage rates with regard to their impact on employment opportunities.’ 

In response to the letter, an official spokesperson for Prime Minister Theresa May stated: ‘The Prime Minister has been clear that we have to build an economy that works for everyone, where people are able to share in the benefits of economic growth.

‘Making sure that people can earn a decent day’s wage is a big part of that.’

Conor D’Arcy, policy analyst at the Resolution Foundation, also commented: ‘By sensibly pegging the NLW to typical earnings, the Government has already built in flexibility to help steer it through choppy economic times.’